Econometric Assessment of IPO Underpricing and Information Asymmetry in Emerging Equity Markets: Evidence from State-Owned Enterprise Privatization (EPRA International Journal of Economics Business and Management Studies)
Summary
- The empirical study examines initial public offering (IPO) underpricing in state-owned enterprise (SOE) privatizations across Central and Eastern Europe and Central Asia from 2012 to 2025.p.3
- Capital-intensive sectors like telecommunications and infrastructure exhibit average initial discounts of 12.30 to 14.75 percent, while competitive sectors routinely surpass 26.00 percent.p.4
- Offerings conducted through dynamic book-building procedures average 13.25 percent underpricing, compared to 28.30 percent for static fixed-price offerings.p.4
- Transactions led by top-tier underwriting syndicates register an initial discount of 12.80 percent versus 25.71 percent for lower-tier domestic solo intermediaries.p.4
- Econometric estimations identify a non-linear, U-shaped relationship between residual state equity retention and underpricing, with an inflection threshold at approximately 43 percent.p.6
Key insights
- High underwriter prestige significantly reduces initial IPO underpricing by an estimated 9.4 percentage points.p.5
- Dynamic book-building allocation lowers initial underpricing by 7.1 percentage points relative to fixed-price offerings.p.5
- Multi-intermediary syndication exerts an independent dampening effect on initial primary underpricing spreads.p.5
- Larger enterprise asset scale and longer operating age significantly compress the underpricing spread by mitigating information opacity.p.5
- Moderate retained state equity up to approximately 43 percent reassures investors against regulatory expropriation and lowers primary discounts.p.6
- Retained state equity exceeding 43 percent triggers agency concerns regarding bureaucratic interference, compelling divesting authorities to widen underpricing discounts.p.6
- Sectoral tangibility and monopolistic market shares reduce fundamental valuation uncertainty and dampen initial underpricing.p.4
- Financial leverage and pre-offering 30-day market volatility amplify valuation concessions demanded by primary market participants.p.5
Topics and entities
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